In the first piece of this two-part series, we will be looking at the business of online music in the MENA, what are the numbers, who’s listening and what business plans are working. Part two will focus on the musicians themselves, how they are struggling to market themselves and survive in an oversaturated market.

In 2016, the revenue from the global digital music industry which involves all types of online music including downloads, grew 17 percent, while the growth in streaming revenue reached a staggering 60 percent. It is not a hyperbola to say that the digital music industry has now become an incredibly important component in how we experience, enjoy, and consume music.

The current user penetration in the Middle Eastern music streaming industry is at 18 percent. It is, however, expected to grow by 10 points in the next five years. Younger generations are more likely to listen to music online and with over half of the population being under 25, the number of new listeners in the region is set to skyrocket.

Although international music giant Spotify is yet to break into the regional market, others such as Deezer and Apple Music have already seen the market potential, and have made their move.

Still, the dominant player in the region remains a local one: Anghami. The Lebanese company now boasts a wide name recognition. It has almost 50 million users, over seven million of whom are monthly active users, revealed cofounder Elie Habib in an email interview with Wamda.

The business of listening to music

Anghami’s business model revolves around two main revenue pillars: an ad supported free tier and a paid subscription echelon called Anghami Plus. The main advantage of the premium service, besides the absence of ads, is the access to unlimited downloads for offline listening. Subscription fees vary depending on the chosen plan. For example, the family plan offering access to six accounts costs $7.49 per month, whereas the six-month plan costs $24.99, including one free month.

About two thirds of Anghami’s profits come from paying subscribers which are growing at an impressive pace of 300 percent a year. The remaining slice of the pie is the result of ad deals and partnerships with big spending companies such as Pepsi and Unilever.

The Lebanese company has also built strong partnerships with regional tycoons such as the MBC Group, one the region's largest media networks, as well as up to 15 different telecom networks. Partnerships such as these not only help the platform gain exclusive content and invaluable media exposure, they are also vital in helping process subscription payments via an already established payment channel.

The shared ventures have often lead to mobile data packets designed exclusively for Anghami streaming. These fall into two categories: in the first, users subscribe to packages that include Anghami Plus, such as those offered by Vodafone Egypt and Du UAE. In the second, customers can upgrade via their phone operator to get extra, free or cheap, data to use specifically for Anghami streaming for example through Touch Lebanon and Zain Saudi.

Via exclusive rights from Rotana, the largest Arabic record label, the platform has grown to include more features such as access to music videos and lyric guides. Recently, the focus has been on providing subscribers with exclusive early releases from their favorite artist.

Although all these numbers and features point to a positive direction, profitability is a steep hill to climb for all companies involved in the music streaming industry. Players will still have to face the competition by other platforms, music rights, pirated music, free streaming services such as Youtube, among other factors. According to Deezer’s last publicly available numbers, for the first half of 2016, despite high growth rates, the company suffered a 12 million euro loss (US$ 14 million). They are now hoping to be valued at a little over $1 billion by next year.

Spotify is now preparing to launch directly on the New York Stock Exchange. The giant is currently valued at $13 billion, but the move remains a risky one nonetheless.

Anghami is a newer player in the global market, hence a smaller one. In November of 2016, during its last investment round the company was valued at $95 million, having received a little over $14 million in disclosed funding.

Still, the industry is battling a variety of problems. Piracy is still rampant in the region. Five years ago, illegal downloads were said to account for over 90 percent of downloads in the Middle East. Today, stream ripping is the newest form of music piracy. It involves sites that allow users to generate illegal permanent files from streaming links.

Even if internet speed in the Arab region fall well below world averages compared to global markets, internet penetration rates stands at 56 percent in MENA.

Worst of all could be the astounding number of unbanked people in the Middle East, with only 14 percent of the people having an account at an institution. Anghami like many digital services is trying to tackle this problem by offering a wide range of payment options, but it remains an uphill climb.

The road ahead

The Lebanese company is looking to develop new partnerships and grow its brand. Among these, Habib has mentioned Carplay, Alexa App and Google Assistant. Customized playlists are also in the works. These utilize machine learning algorithms to make individualized recommendations from Anghami’s catalogue.  

The company is also looking to enter the original content market and will be launching projects in other undisclosed entertainment avenues nearing the end of the year.

Regionally, the outlook for the digital music industry, it’s investors and entrepreneurs, is looking bright.

Feature images via Pixabay.